SOYBEAN PRODUCERS: INCREASE 2013-CROP CASH SALES... Soybean futures gave us a sell signal late last week by filling the Aug. 26 chart gap. While the market has not shown followthrough selling so far this week, this is likely a pause before the market moves the next leg lower through harvest. With the soybean price structure giving encouragement to have all of your beans sold by harvest, basis still historically strong and likely the strongest it will be until next summer, and the risk that Sept. 1 stocks (2012-13 ending stocks) will be slightly higher than USDA estimated in the September Supply & Demand Report, it's time to increase 2013-crop cash sales.
Hedgers should make a 50% cash sale to get to 100% sold on expected 2013-crop in the cash market. We'll manage risk the remainder of the marketing year on the board. Hedgers should be prepared to reown a portion of 2013 soybean cash sales in long call options or futures. Cash-only marketers should make a 25% sale to get to 75% priced on 2013-crop production.
GREENREPORT REFLECTS SWIFT CHANGE ACROSS WESTERN BELT... The Kansas Applied Remote Sensing (KARS) GreenReport Greenness map that compares the change of greenness from the middle of September to early September reflects the swift change we have seen across the western Corn Belt since the Pro Farmer Midwest Crop Tour. An extended hot and dry period has resulted in a quicker-than-usual decline in greenness across much of the western Corn Belt, while there's been little change to greenness across the eastern Belt. Click here for related images.
WEEKLY ETHANOL PRODUCTION DECLINES SLIGHTLY... The Energy Information Administration reports ethanol production the week ended Sept. 20 slowed by 6,000 barrels per day (bpd) from the previous week to 832,000 bpd. The four-week average for ethanol production stands at 834,000 bpd for an annualized rate of 12.8 billion gallons. Ethanol stocks dropped by 565,000 barrels from the previous week to 15.61 million barrels.
SOURCES: NASS, WAOB NOT ESSENTIAL PERSONNEL IF GOV'T SHUTS DOWN... Workers in USDA’s National Ag Statistics Service (NASS) and World Agricultural Outlook Board (WAOB) are expected to be deemed non-essential personnel in the event that the U.S. government is shut down due to a lack of an agreement on a spending plan to keep the government operating when the new fiscal year starts Oct. 1. Whether any government shutdown would affect the release of any USDA report depends on how long any shutdown would last, contacts advise.
For example, USDA’s Crop Production and Supply & Demand Reports that are due to be released Oct. 11 would still likely come out on schedule if any government shutdown would last "only one or two days," one source observed. "The objective survey work would only be temporarily halted under that type of scenario." The rest of the data gathering for the October report would take place through Oct. 7 and could be affected if the shutdown is prolonged. However, sources said it was not clear how long of a shutdown would prompt a delay in releasing either report.
As noted in "First Thing Today," food and meat inspectors are expected to be classified as essential personnel and Vilsack says he has the authority to designate essential employees and keep them working without pay on the assumption they will be reimbursed when funding is restored. Learn more.
SENATE VOTES TO LIMIT DEBATE ON PROCEEDING TO STOPGAP CR PLAN... The Senate voted 100-0 to limit debate on proceeding to the House-passed stopgap spending bill to avert a government shutdown. The Senate is expected to proceed with up to 30 hours of debate followed by a vote Thursday on the motion to proceed, unless there is an agreement on timing. The Senate would then vote Saturday on the motion to invoke cloture on the continuing resolution (HJRes 59).
After another 30 hours of post-cloture debate, the Senate could vote on amendments and the spending plan on Sunday. The vote to proceed to the stopgap spending plan would extend federal spending at sequester levels through Dec. 15, 2013.
Once the Senate is on the bill itself, Reid can offer an amendment to strike the provision in the House stopgap spending bill that would deny funding for the implementation of the health care law, as well as one pushed by Democrats to alter its length to 45 days. Senate rules require only a simple majority for that vote and for passage of the bill, which could come earlier than Sunday.
CPI SHOWS SLIGHT INCREASE IN ALL FOOD PRICES LAST MONTH... The Consumer Price Index (CPI) for all food rose 0.2% from July to August and it now stands 1.4% above year-ago, according to USDA's Economic Research Service (ERS). Both the food-at-home and the food-away-from-home CPI rose 0.2% in August to stand 1% and 2% over year-ago levels, respectively.
Based on current conditions, ERS's 2013 inflation forecast is for increases of 1.5% to 2.5% for all food prices, unchanged from last month. But ERS did lower its price forecast for food-at-home (grocery store food items) by one percentage point to 1%. This signals it expects prices to rise less than they did in 2012, and that annual inflation will be below the 20-year historical average of 2.8%. ERS explains that the impact of the 2012 drought on retail food prices has been less than anticipated and has been overshadowed by factors like "decreased exports of many U.S. agricultural products, a stronger U.S. dollar, low energy price inflation and decreased prices for many commodities unaffected by the drought."
For 2014, ERS forecasts inflation of 2.5% to 3.5% for all food prices, unchanged from its August update. ERS believes food price inflation will return to a more historically normal level. "Inflationary pressures are expected to be moderate, given the outlook for commodity prices, animal inventories and ongoing export trends," ERS elaborates.
PF MIDWEEK MARKETING GAME PLAN UPDATE...
CORN: Hedgers and cash-only marketers have 25% of expected 2013-crop production sold via cash forward contracts for harvest delivery. The corn market is going to fight seasonal pressure moving forward as harvest activity picks up, but we aren't in the camp that there's a lot of downside price risk from current levels -- even if futures violate support at the August low. For now, we are willing to wait on an overdue corrective rebound to develop, though that will likely take some time. You must be prepared to make sales on an extended price recovery.
BEANS: Hedgers now have 100% of expected 2013-crop production sold via cash forward contract for harvest delivery, while cash-only marketers are 75% sold on 2013-crop. Hedgers should be prepared to reown a portion of 2013 soybean cash sales in long call options or futures as long-term fundamentals are bullish. Cash-only marketers can't be as aggressive in case futures and/or basis rally sharply over the next 11 months.
WHEAT: Futures are working on a rounded bottom on the daily chart -- the most friendly technical action the wheat market has seen in quite some time. With that said, hedgers and cash-only marketers should be prepared to sell an extended corrective recovery as it's going to be difficult for wheat to find sustained strength if the corn and soybean markets face seasonal selling pressure during harvest.
COTTON: Hedgers and cash-only marketers have 50% of expected 2013-crop production sold via cash forward contract for harvest delivery. Hedgers also have 50% of expected production hedged in December cotton at 83.87 cents. Hedgers should maintain this hedge coverage as we expect more choppy (potentially highly choppy) trade near-term.
CATTLE: Live cattle futures are showing signs of moving the next leg higher. While futures are into a pattern of higher lows, the move higher is likely to be more of a grind than a sustained rally as there are still demand uncertainties. But with tightening supplies pointing prices higher, fed cattle producers should continue to carry all risk in the cash market. Feeder cattle futures are strengthening amid tight supplies and cheaper feed prices. At this stage, we'll wait to see how futures react around the contract highs before advising long hedgers for feeder cattle buyers.
HOGS: Hog producers have 50% of expected 4th-qtr. production hedged in Dec. lean hog futures at an average price of $82.12 1/2. We're hoping to heavy up 4th-qtr. coverage and to add 1st-qtr. 2014 hedges in Feb. lean hog futures, but we want some confirmation a seasonal top is in place before adding to our existing hedges as attitudes are bullish.
FEED: 25% of 4th-qtr. protein needs are covered in long Dec. soybean meal futures and 25% of 1st-qtr. needs are covered in long March meal futures. Be prepared to extend coverage on an extended price pullback as we feel prices are ultimately headed higher. We're also looking to add long corn coverage after the market signals a low is in place.